On Wednesday, Goldman Sachs analyst Christine Cho maintained a Neutral rating on Yum! Brands (NYSE:YUM) with a steady price target of $151.00. The $35.6 billion restaurant giant, currently trading near its 52-week low at $127.43, announced the termination of its franchise agreement with IS Gida A.S., a key operator of the company's KFC and Pizza Hut units in Turkey.
According to InvestingPro, YUM maintains a robust financial health score of GOOD, with particularly strong profitability metrics.
Yum! Brands had been working with IS Gida for several months to provide support and address significant issues. However, the franchisee was ultimately unable to meet Yum! Brands' operational standards. IS Gida A.S., a subsidiary of IS Holding A.S., managed 283 KFC outlets and 254 Pizza Hut locations in the country. With a healthy gross profit margin of 48.6% and consistent dividend payments for 21 consecutive years, the company maintains strong operational fundamentals despite regional challenges.
The termination of this franchise agreement is not anticipated to significantly affect Yum! Brands' operating profit from 2025 onward. Sales from the Turkish locations were notably lower than the global average sales per restaurant. This underperformance has led to the assessment that the loss of royalties from these outlets will not materially impact the company's financials.
Yum! Brands expressed confidence in its ability to continue growing its global unit count despite this setback. The company's reassurance suggests a robust strategy to expand its international presence and maintain its market position.
In other recent news, Yum! Brands has seen a series of developments. The company's subsidiary, Taco Bell, reported a growth in same-store sales that surpassed expectations in Q4 of 2024, leading Loop Capital to maintain a Hold rating on Yum! Brands. However, Yum! Brands also terminated its franchise agreements with IS Gida A.S., affecting all KFC and Pizza Hut locations in Turkey due to the franchisee's failure to meet operational standards.
Yum! Brands also made headlines with a series of analyst upgrades and downgrades. Argus upgraded the company's stock to Buy, citing strong sales and AI-driven marketing initiatives, while Bernstein advised caution for companies with significant international exposure, including Yum! Brands. Guggenheim also maintained a positive outlook, raising the stock's price target to $155, expecting a recovery in the Middle East and Asia markets.
In terms of earnings and revenue, Yum! Brands reported a 3% year-over-year profit growth in its third quarter, primarily driven by strong performance at Taco Bell U.S. and KFC International. The company also declared a quarterly dividend of $0.67 per share of common stock. In other company news, Yum! Brands announced key leadership changes, including Erica Burkhart's promotion to Chief Legal Officer and Joe Park's expanded role in overseeing digital and restaurant technology.
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